Exhibit
      10.2

     

    NEITHER
      THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE
      HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE
      UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
      (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
      PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
      PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
      THE
      REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. 

    


    THIS
      NOTE DOES NOT REQUIRE PHYSICAL SURRENDER OF THE NOTE IN THE EVENT OF A PARTIAL
      REDEMPTION OR CONVERSION. AS A RESULT, FOLLOWING ANY REDEMPTION OR CONVERSION
      OF
      ANY PORTION OF THIS NOTE, THE OUTSTANDING PRINCIPAL AMOUNT REPRESENTED BY THIS
      NOTE MAY BE LESS THAN THE PRINCIPAL AMOUNT AND ACCRETED AMOUNTS SET FORTH
      BELOW.

    


    


    7%
      CONVERTIBLE NOTE DUE DECEMBER 31, 2011

    


    OF

    


    NEXMED,
      INC.

     

    
      	Note
              No.: ___ 	
              Original
                Principal Amount: ________ 

            
	Issuance
              Date: June 27, 2008 	
              New
                York, New York 

            


    

     

    This
      Note
      (“Note”)
      is one
      of a duly authorized issue of Notes of NEXMED,
      INC.,
      a
      corporation duly organized and existing under the laws of the State of Nevada
      (the
      “Company”),
      designated as the Company's 7% Convertible Notes Due December 31,
      2011
      (“Maturity
      Date”)
      in
      an
      aggregate principal amount (when taken together with the original principal
      amounts of all other Notes) which does not exceed Five Million Seven Hundred
      Fifty Thousand U.S. Dollars (U.S. $5,750,000) (the “Notes”).

     

    For
      Value
      Received,
      the
      Company hereby promises to pay to the order of [HOLDER]
      or
      its
      registered assigns or successors-in-interest (“Holder”)
      the
      principal sum of _____________________________ (U.S. $________), together with
      all accrued but unpaid accretions thereto, if any, on the Maturity Date, to
      the
      extent such principal amount and accretion has not been repaid with or converted
      into the Company's Common Stock, $0.001 par value per share (the “Common
      Stock”),
      in
      accordance with the terms hereof. The unpaid principal balance hereof shall
      automatically increase daily at the rate of 7% per annum from the date of
      original issuance hereof (the “Issuance
      Date”)
      until
      the same becomes due and payable on the Maturity Date, or such earlier date
      upon
      acceleration or by conversion or redemption in accordance with the terms hereof
      or of the other Agreements. Such principal accretion under this Note shall
      occur
      daily commencing on the Issuance Date and shall be computed on the basis of
      a
      360-day year and shall be payable in accordance with Section 2 hereof.
      Notwithstanding anything contained herein, this Note shall bear interest on
      the
      due and unpaid Principal Amount from and after the occurrence and during the
      continuance of an Event of Default pursuant to Section 5(a), at the rate (the
      “Default
      Rate”)
      equal
      to the lower of twenty percent (20%) per annum or the highest rate permitted
      by
      law. Unless otherwise agreed or required by applicable law, payments will be
      applied first to any unpaid collection costs, then to unpaid default interest
      and Accreted Amounts (as defined below), and fees and any remaining amount
      to
      principal. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    All
      payments of principal (including accreted principal) and default interest on
      this Note which are not paid in shares of Common Stock as permitted or required
      hereunder shall be made in lawful money of the United States of America by
      wire
      transfer of immediately available funds to such account as the Holder may from
      time to time designate by written notice in accordance with the provisions
      of
      this Note or by Company check. This Note may not be prepaid in whole or in
      part
      except as otherwise provided herein or in the other Agreements. Whenever any
      amount expressed to be due by the terms of this Note is due on any day which
      is
      not a Business Day (as defined below), the same shall instead be due on the
      next
      succeeding day which is a Business Day.

     

    The
      following terms and conditions shall apply to this Note:

     

    Section
      1. Definitions.
      Capitalized
      terms used herein and not otherwise defined shall have the meanings set forth
      in
      the Purchase Agreement dated on or about the Issuance Date pursuant to which
      the
      Notes were originally issued (the “Purchase
      Agreement”).
      For
      purposes hereof the following terms shall have the meanings ascribed to them
      below:

     

    “Bankruptcy
      Event”
means
      any of the following events: (a) the Company or any subsidiary commences a
      case
      or other proceeding under any bankruptcy, reorganization, arrangement,
      adjustment of debt, relief of debtors, dissolution, insolvency or liquidation
      or
      similar law of any jurisdiction relating to the Company or any subsidiary
      thereof; (b) there is commenced against the Company or any subsidiary any such
      case or proceeding that is not dismissed within 60 days after commencement;
      (c)
      the Company or any subsidiary is adjudicated insolvent or bankrupt or any order
      of relief or other order approving any such case or proceeding is entered;
      (d)
      the Company or any subsidiary suffers any appointment of any custodian or the
      like for it or any substantial part of its property that is not discharged
      or
      stayed within 60 days; (e) the Company or any subsidiary makes a general
      assignment for the benefit of creditors; (f) the Company or any subsidiary
      fails
      to pay, or states that it is unable to pay or is unable to pay, its debts
      generally as they become due; or (g) the Company or any subsidiary, by any
      act
      or failure to act, expressly indicates its consent to, approval of or
      acquiescence in any of the foregoing or takes any corporate or other action
      for
      the purpose of effecting any of the foregoing.

    


    “Business
      Day”
      shall
      mean any day other than a Saturday, Sunday or a day on which commercial banks
      in
      the City of New York are authorized or required by law or executive order to
      remain closed.


    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    


    “Change
      in Control Transaction”
will
      be
      deemed to exist if (i) there occurs any consolidation, merger or other business
      combination of the Company with or into any other corporation or other entity
      or
      person (whether or not the Company is the surviving corporation), or any other
      corporate reorganization or corporate transaction or series of related
      transactions in which in any of such events the voting stockholders of the
      Company prior to such event cease to own 50% or more of the voting power, or
      corresponding voting equity interests, of the surviving corporation after such
      event (including without limitation any “going private” transaction under Rule
      13e-3 promulgated pursuant to the Exchange Act or tender offer by the Company
      under Rule 13e-4 promulgated pursuant to the Exchange Act for 20% or more of
      the
      Company's Common Stock), (ii) any person (as defined in Section 13(d) of the
      Exchange Act), together with its affiliates and associates (as such terms are
      defined in Rule 405 under the Securities Act), beneficially owns or is deemed
      to
      beneficially own (as described in Rule 13d-3 under the Exchange Act without
      regard to the 60-day exercise period) in excess of 50% of the Company's voting
      power, (iii) there is a replacement of more than one-half of the members of
      the
      Company’s Board of Directors which is not approved by those individuals who are
      members of the Company's Board of Directors on the date thereof, (iv) in one
      or
      a series of related transactions, there is a sale or transfer of all or
      substantially all of the assets of the Company, determined on a consolidated
      basis, (v) the Company enters into an agreement providing for an event set
      forth
      in (i), (ii), (iii) or (iv) above, or (vi) any of the foregoing occurs with
      respect to the Company or the Operating Subsidiary.

     

    “Conversion
      Price”
      shall
      initially equal $2.00 (which Conversion Price shall be subject to adjustment
      as
      set forth herein).

     

    “Convertible
      Securities”
means
      any convertible securities, warrants, options or other rights to subscribe
      for
      or to purchase or exchange for, shares of Common Stock.

     

    “Effective
      Registration” shall
      mean (i) the resale of all Registrable Securities (as defined in the
      Registration Rights Agreement) is either covered by an effective registration
      statement in accordance with the terms of the Registration Rights Agreement
      which registration statement is not subject to any suspension or stop orders
      or
      permitted without registration under the Securities Act and without any
      limitations or restrictions pursuant to Rule 144 promulgated under the
      Securities Act (provided
      that independent counsel for the Company furnishes to the Company’s transfer
      agent a written legal opinion confirming such permitted resale under Rule 144,
      which counsel and form of opinion shall be reasonably acceptable to the
      Holder);
      (ii)
      the resale of such Registrable Securities may be effected either pursuant to
      a
      current and deliverable prospectus that is not subject at the time to any
      blackout or similar circumstance or pursuant to Rule 144 promulgated under
      the
      Securities Act without registration and without any limitations or restrictions
      (provided that independent counsel for the Company furnishes to the Company’s
      transfer agent a written legal opinion confirming such permitted resale under
      Rule 144, which counsel and form of opinion shall be reasonably acceptable
      to
      the Holder); (iii) such Registrable Securities are listed, or approved for
      listing prior to issuance, on an Approved Market and are not subject to any
      trading suspension (nor shall trading generally have been suspended on such
      exchange or market), and the Company shall not have been notified of any pending
      or threatened proceeding or other action to delist or suspend the Common Stock
      on the Approved Market on which the Common Stock is then traded or listed;
      (iv)
      the requisite number of shares of Common Stock shall have been duly authorized
      and reserved for issuance as required by the terms of the Agreements; (v) the
      closing bid price of the Common Stock on the Principal Market shall be at least
      $1.00; and (vi) none of the Company or any direct or indirect subsidiary of
      the
      Company is subject to any Bankruptcy Event.

    


    “Exchange
      Act”
shall
      mean the Securities Exchange Act of 1934, as amended.

    


    “Interim Conversion
      Price”
      shall
      initially equal $1.75 (which Interim Conversion Price shall be subject to
      adjustment as set forth herein).


    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    


    “Market
      Price”
shall
      equal the average of the daily VWAPs over the five (5) consecutive Trading
      Days
      immediately preceding the date on which the Market Price is being
      determined.

    


    “Per
      Share Selling Price”
shall
      include the amount actually paid by third parties for each share of Common
      Stock
      in a sale or issuance by the Company. In the event a fee is paid by the Company
      in connection with such transaction directly or indirectly to such third party
      or its affiliates, any such fee shall be deducted from the selling price pro
      rata to all shares sold in the transaction to arrive at the Per Share Selling
      Price. A sale of shares of Common Stock shall include the sale or issuance
      of
      Convertible Securities, and in such circumstances the Per Share Selling Price
      of
      the Common Stock covered thereby shall also include the exercise, exchange
      or
      conversion price thereof (in addition to the consideration received by the
      Company upon such sale or issuance less the fee amount as provided above).
      In
      case of any such security issued in a Variable Rate Transaction, the Per Share
      Selling Price shall be deemed to be the lowest conversion or exercise price
      at
      which such securities are converted or exercised or might have been converted
      or
      exercised, or the lowest adjustment price, as the case may be, over the life
      of
      such securities. If shares are issued for a consideration other than cash,
      the
      Per Share Selling Price shall be the fair value of such consideration as
      determined in good faith by independent certified public accountants mutually
      acceptable to the Company and the Holder. In the event the Company directly
      or
      indirectly effectively reduces the conversion, exercise or exchange price for
      any Convertible Securities which are currently outstanding, then the Per Share
      Selling Price shall equal such effectively reduced conversion, exercise or
      exchange price.

     

    “Principal
      Amount”
shall
      refer to the sum of (i) the original principal amount of this Note, (ii) all
      accrued but unpaid Accreted Amounts hereunder, and (iii) any default payments
      (including default interest) owing under the Agreements but not previously
      paid
      or added to the Principal Amount.

     

    “Principal
      Market”
      shall
      mean the NASDAQ Capital Market or such other principal market or exchange on
      which the Common Stock is then listed for trading.

     

    “Registration
      Statement”
shall
      have the meaning set forth in the Registration Rights Agreement. 

     

    “Securities
      Act”
shall
      mean the Securities Act of 1933, as amended.

    


    “Stock
      Payment Price”
on
      any
      particular day shall mean the lesser of (a) 95% of the Market Price as of such
      day, or (b) the Market Price as of such day less $0.08.

    


    “Trading
      Day”
      shall
      mean a day on which there is trading on the Principal Market.


    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    


    “VWAP”
      shall
      mean the daily dollar volume-weighted average sale price for the Common Stock
      on
      the Principal Market on any particular Trading Day during the period beginning
      at 9:30 a.m., New York City Time (or such other time as the Principal Market
      publicly announces is the official open of trading), and ending at 4:00 p.m.,
      New York City Time (or such other time as the Principal Market publicly
      announces is the official close of trading), as reported by Bloomberg through
      its "Volume at Price" functions or, if the foregoing does not apply, the dollar
      volume-weighted average price of such security in the over-the-counter market
      on
      the electronic bulletin board for such security during the period beginning
      at
      9:30 a.m., New York City Time (or such other time as the Principal Market
      publicly announces is the official open of trading), and ending at 4:00 p.m.,
      New York City Time (or such other time as the Principal Market publicly
      announces is the official close of trading), as reported by Bloomberg, or,
      if no
      dollar volume-weighted average price is reported for such security by Bloomberg
      for such hours, the average of the highest closing bid price and the lowest
      closing ask price of any of the market makers for such security as reported
      in
      the "pink sheets" by the National Quotation Bureau, Inc. If the VWAP cannot
      be
      calculated for such security on such date on any of the foregoing bases, the
      VWAP of such security on such date shall be the fair market value as mutually
      determined by the Company and the holders of at least a majority of the
      principal amount of the Notes then outstanding. All such determinations of
      VWAP
      shall to be appropriately and equitably adjusted in accordance with the
      provisions set forth herein for any stock dividend, stock split, stock
      combination or other similar transaction occurring during any period used to
      determine the Market Price (or other period utilizing VWAPs).

     

    Section
      2. Accretion.

     

    (a) Payment
      Dates. On
      the
      first day of each calendar quarter after the Issuance Date beginning on October
      1, 2008 (each an “Accretion
      Payment Date”),
      the
      Company shall either pay in cash the dollar amount accrued and accreted to
      the
      principal amount hereunder since the prior Accretion Payment Date (or Issuance
      Date if no such Accretion Payment Date has yet to occur) (“Accreted
      Amount”)
      or
      effect the automatic conversion of such Accreted Amount as provided in this
      Section 2.

     

    (b) Payment
      or Automatic Conversion.
      Subject
      to the terms hereof, the Company shall either (i) pay the Accreted Amount in
      full in cash on each Accretion Payment Date or (ii) effect an automatic
      conversion of such Accreted Amount into shares of Common Stock in accordance
      with the terms hereof, but not both, at the Company’s option. Prior to each
      Accretion Payment Date the Company shall deliver to all the holders of Notes
      a
      written irrevocable notice electing to pay such Accreted Amount in cash or
      effect such automatic conversion on such Accretion Payment Date. Such notice
      shall be delivered at least five (5) Trading Days prior to the applicable
      Accretion Payment Date but no more than twenty (20) days prior to such Accretion
      Payment Date. If such notice is not delivered within the prescribed period
      set
      forth in the preceding sentence, then the Accreted Amount shall be paid in
      cash.
      If the Company elects to pay any Accreted Amount in cash on an Accretion Payment
      Date, then on such date the Company shall pay to the Holder an amount equal
      to
      the Accreted Amount due in satisfaction of such obligation. If the Company
      elects to effect an automatic conversion of such Accreted Amount into shares
      of
      Common Stock, the number of such shares to be issued for such Accretion Payment
      Date shall be the number determined by dividing (x) the Accreted Amount due,
      by
      (y) the Stock Payment Price as of such Accretion Payment Date. Such shares
      shall
      be issued and delivered within three (3) Trading Days following such Accretion
      Payment Date and shall be duly authorized, validly issued, fully paid,
      non-assessable and free and clear of all encumbrances, restrictions and legends.
      If any Holder does not receive the requisite number of shares of Common Stock
      in
      the form required above within such three Trading Day period, the Holder shall
      have the option of either (a) requiring the Company to issue and deliver all
      or
      a portion of such shares or (b) canceling such election to effect such automatic
      conversion of the Accreted Amount (in whole or in part), in which case the
      Company shall immediately pay in cash the Accreted Amount due hereunder or
      such
      portion as the Holder specifies is to be paid in cash instead of being
      converted. Except as otherwise provided in this Section 2, all holders of Notes
      must be treated equally with respect to such payment and conversion of Accreted
      Amounts. Any conversion of the Accreted Amount hereunder into shares of Common
      Stock pursuant to the terms hereof shall constitute and be deemed a conversion
      of such portion of the Principal Amount of this Note for all purposes under
      this
      Note and the other Agreements (except that such conversion shall be at the
      Stock
      Payment Price and except as otherwise provided herein).

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    


    (c) Limitations
      to Automatic Conversion into Common Stock.
      Notwithstanding anything to the contrary herein, the Company shall be prohibited
      from exercising its right to effect an automatic conversion of any Accreted
      Amount hereunder (and must deliver cash in respect thereof) on the applicable
      Accretion Payment Date (1) if at any time within ten (10) Trading Days prior
      to
      the Accretion Payment Date there fails to exist Effective Registration or an
      Event
      of
      Default hereunder exists or occurs,
      unless
      otherwise waived in writing by the Holder in whole or in part at the Holder’s
      option, (2) if the Company’s net cash on hand (including cash equivalents) as of
      such Accretion Payment Date is greater than $3 million (any conversion election
      by the Company under this Section 2 shall constitute a representation by the
      Company that such net cash amount is below $3 million), and (3) to the extent,
      and only to the extent, that such conversion into shares of Common Stock would
      result in the Holder hereof exceeding the limitations contained in Section
      3(i)
      below.

     

    Section
      3. Conversion.

     

    (a) Conversion
      Right.
      Subject
      to the terms hereof and restrictions and limitations contained herein, the
      Holder shall have the right, at such Holder's option, at any time and from
      time
      to time to convert the outstanding Principal Amount under this Note in whole
      or
      in part by delivering to the Company a fully executed notice of conversion
      in
      the form of conversion notice attached hereto as Exhibit
      A
      (the
“Conversion
      Notice”),
      which
      may be transmitted by facsimile. Notwithstanding anything to the contrary
      herein, this Note and the outstanding Principal Amount hereunder shall not
      be
      convertible into Common Stock to the extent that such conversion would result
      in
      the Holder hereof exceeding the limitations contained in, or otherwise violating
      the provisions of, Section 3(i) below.

     

    (b) Common
      Stock Issuance Upon Conversion.

     

    (i) Conversion
      Date Procedures.
      Upon
      conversion of this Note pursuant to Section 3(a) above, the outstanding
      Principal Amount hereunder shall be converted into such number of fully paid,
      validly issued and non-assessable shares of Common Stock, free of any liens,
      claims and encumbrances, as is determined by dividing the outstanding Principal
      Amount being converted by the then applicable Conversion Price. The date of
      any
      Conversion Notice hereunder shall be referred to herein as the “Conversion
      Date”.
      If a
      conversion under this Note cannot be effected in full for any reason, or if
      the
      Holder is converting less than all of the outstanding Principal Amount hereunder
      pursuant to a Conversion Notice, the Company shall promptly deliver to the
      Holder (but no later than five Trading Days after the Conversion Date) a Note
      for such outstanding Principal Amount as has not been converted if this Note
      has
      been surrendered to the Company for partial conversion. The Holder shall not
      be
      required to physically surrender this Note to the Company upon any conversion
      hereunder unless the full outstanding Principal Amount represented by this
      Note
      is being converted. The Holder and the Company shall maintain records showing
      the outstanding Principal Amount so converted and the dates of such conversions
      or shall use such other method, reasonably satisfactory to the Holder and the
      Company, so as not to require physical surrender of this Note upon each such
      conversion. 


    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    


    (ii) Stock
      Certificates or DWAC.
      The
      Company will deliver to the Holder not
      later
      than three (3) Trading Days after the Conversion Date, a certificate or
      certificates, which shall be free of restrictive legends and trading
      restrictions if the Registration Statement has been declared effective,
      representing the number of shares of Common Stock being acquired upon the
      conversion of this Note. In lieu of delivering physical certificates
      representing the shares of Common Stock issuable upon conversion of this Note,
      provided the Company's transfer agent is participating in the Depository Trust
      Company (“DTC”)
      Fast
      Automated Securities Transfer (“FAST”)
      program, upon request of the Holder, the Company shall use commercially
      reasonable efforts to cause its transfer agent to electronically transmit such
      shares issuable upon conversion to the Holder (or its designee), by crediting
      the account of the Holder’s (or such designee’s) prime broker with DTC through
      its Deposit Withdrawal Agent Commission system (provided that the same time
      periods herein as for stock certificates shall apply). If in the case of any
      conversion hereunder, such certificate or certificates are not delivered to
      or
      as directed by the Holder by the fifth Trading Day after the Conversion Date,
      the Holder shall be entitled by written notice to the Company at any time on
      or
      before its receipt of such certificate or certificates thereafter, to rescind
      such conversion, in which event the Company shall immediately return this Note
      tendered for conversion. If the conversion has not been rescinded in accordance
      with the previous sentence and the Company fails to deliver to the Holder such
      certificate or certificates (or shares through DTC) pursuant to this Section
      3(b) (free of any restrictions on transfer or legends, if such shares have
      been
      registered) in accordance herewith, prior to the seventh Trading Day after
      the
      Conversion Date, the Company shall pay to the Holder, in cash, an amount equal
      to 2% of the Principal Amount per month until such delivery takes place (pro
      rated for partial months).

     

    (c) Conversion
      Price Adjustments.

     

    (i) Stock
      Dividends, Splits and Combinations.
      If the
      Company or any of its subsidiaries, at any time while the Notes are outstanding
      (A) shall pay a stock dividend or otherwise make a distribution or distributions
      on any equity securities (including instruments or securities convertible into
      or exchangeable for such equity securities) in shares of Common Stock, (B)
      subdivide outstanding Common Stock into a larger number of shares, or (C)
      combine outstanding Common Stock into a smaller number of shares, then each
      Affected Conversion Price (as defined below) shall be multiplied by a fraction,
      the numerator of which shall be the number of shares of Common Stock outstanding
      before such event and the denominator of which shall be the number of shares
      of
      Common Stock outstanding after such event. Any adjustment made pursuant to
      this
      Section 3(c)(i) shall become effective immediately after the record date for
      the
      determination of stockholders entitled to receive such dividend or distribution
      and shall become effective immediately after the effective date in the case
      of a
      subdivision or combination. 

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    


    As
      used
      in this Note, the Affected Conversion Prices (each an “Affected
      Conversion Price”)
      shall
      refer to: (i) the Conversion Price; (ii) the Interim Conversion Price; and
      (iii)
      each reported VWAP occurring on any Trading Day included in the period used
      for
      determining the Market Price, which Trading Day occurred before the record
      date
      in the case of events referred to in clause (A) of this subparagraph 3(c)(i)
      and
      before the effective date in the case of the events referred to in clauses
      (B)
      and (C) of this subparagraph 3(c)(i).

     

    (ii) Distributions.
      If the
      Company or any of its subsidiaries, at any time while the Notes are outstanding,
      shall distribute to all holders of Common Stock evidences of its indebtedness
      or
      assets or cash or rights or warrants to subscribe for or purchase any security
      of the Company or any of its subsidiaries (excluding those referred to in
      Section 3(c)(i) above), then concurrently with such distributions to holders
      of
      Common Stock, the Company shall distribute to holders of the Notes the amount
      of
      such indebtedness, assets, cash or rights or warrants which the holders of
      Notes
      would have received had all their Notes then held been converted into Common
      Stock at the applicable Conversion Price immediately prior to the record date
      for such distribution.

     

    (iii) Common
      Stock Issuances.
      In the
      event that the Company or any of its subsidiaries (A) issues or sells any Common
      Stock or Convertible Securities or (B) directly or indirectly effectively
      reduces the conversion, exercise or exchange price for any Convertible
      Securities which are currently outstanding, at or to an effective Per Share
      Selling Price which is less than the Conversion Price or Interim Conversion
      Price, then in each such case the Conversion Price and/or Interim Conversion
      Price, as the case may be, in effect immediately prior to such issue or sale
      or
      record date, as applicable, shall be automatically reduced effective
      concurrently with such issue or sale to an amount determined by multiplying
      the
      Conversion Price and/or Interim Conversion Price, as the case may be, then
      in
      effect by a fraction, (x) the numerator of which shall be the sum of (1) the
      number of shares of Common Stock outstanding immediately prior to such issue
      or
      sale, plus (2) the number of shares of Common Stock which the aggregate
      consideration received by the Company for such additional shares would purchase
      at such Conversion Price or Interim Conversion Price, as the case may be, and
      (y) the denominator of which shall be the number of shares of Common Stock
      of
      the Company outstanding immediately after such issue or sale. The foregoing
      provision shall not apply to any issuances or sales of Common Stock or
      Convertible Securities (i) pursuant to any Convertible Securities currently
      outstanding on the date hereof in accordance with the terms of such Convertible
      Securities in effect on the date hereof, (ii) pursuant to the Notes, or (iii)
      to
      any officer, director, employee or Consultant (as defined below) of the Company
      pursuant to a bona fide option or equity incentive plan duly adopted by the
      Company, provided that any such issuances or sales to Consultants must be
      reasonable consideration for the services rendered by such Consultants and
      shall
      not exceed more than $1 million in market value to all Consultants in the
      aggregate under any circumstances. “Consultant” shall mean any natural person
      providing bona fide services to the Company which are not in connection with
      the
      offer or sale of securities in a capital raising transaction and which do not
      directly or indirectly promote or maintain a market for the Company’s
      securities. The Company shall give to the Holder written notice of any such
      sale
      of Common Stock within 24 hours of the closing of any such sale and shall within
      such 24 hour period issue a press release announcing such sale if such sale
      is a
      material event for, or otherwise material to, the Company. 

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    


    (iv) Rounding
      of Adjustments. All
      calculations under this Section 3 or Section 2 shall be made to the nearest
      cent
      or the nearest 1/100th of a share, as the case may be.

     

    (v) Notice
      of Adjustments. Whenever
      any Affected Conversion Price is adjusted pursuant to Section 3(c)(i), (ii)
      or
      (iii) above, the Company shall promptly deliver to each holder of the Notes,
      a
      notice setting forth the Affected Conversion Price after such adjustment and
      setting forth a brief statement of the facts requiring such adjustment, provided
      that any failure to so provide such notice shall not affect the automatic
      adjustment hereunder.

     

    (vi) Change
      in Control Transactions.
      In case
      of any Change in Control Transaction, the Holder shall have the right thereafter
      to, at its option, (A) convert this Note, in whole or in part, at the then
      applicable Conversion Price into the shares of stock and other securities,
      cash
      and/or property receivable upon or deemed to be held by holders of Common Stock
      following such Change in Control Transaction, and the Holder shall be entitled
      upon such event to receive such amount of securities, cash or property as the
      shares of the Common Stock of the Company into which this Note could have been
      converted immediately prior to such Change in Control Transaction would have
      been entitled if such conversion were permitted, subject to such further
      applicable adjustments set forth in this Section 3 or (B) require the Company
      or
      its successor to redeem this Note, in whole or in part, at a redemption price
      equal to 110% of the outstanding Principal Amount being redeemed. The terms
      of
      any such Change in Control Transaction shall include such terms so as to
      continue to give to the Holders the right to receive the amount of securities,
      cash and/or property upon any conversion or redemption following such Change
      in
      Control Transaction to which a holder of the number of shares of Common Stock
      deliverable upon such conversion would have been entitled in such Change in
      Control Transaction, and default interest and Accreted Amounts payable hereunder
      shall be in cash or such new securities and/or property, at the Holder’s option.
      This provision shall similarly apply to successive reclassifications,
      consolidations, mergers, sales, transfers or share exchanges.

     

    (vii) Notice
      of Certain Events.
      If:

     

    
      	 	 	 	 	
              A.

            	
              the
                Company shall declare a dividend (or any other distribution) on its
                Common
                Stock; or

            


    

    


    
      	 	 	 	 	
              B.

            	
              the
                Company shall declare a special nonrecurring cash dividend on or
                a
                redemption of its Common Stock; or

            


    

    


    
      	 	 	 	 	
              C.

            	
              the
                Company shall authorize the granting to all holders of the Common
                Stock
                rights or warrants to subscribe for or purchase any shares of capital
                stock of any class or of any rights;
                or

            


    

    


    
      	 	 	 	 	
              D.

            	
              the
                approval of any stockholders of the Company shall be required in
                connection with any reclassification of the Common
                Stock of the Company, any consolidation or merger to which the Company
                is
                a party, any sale or transfer of all or substantially all of the
                assets of
                the Company, or any compulsory share of exchange whereby the Common
                Stock
                is converted into other securities, cash or property;
                or

            


    

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    


    
      	 	 	 	 	
              E.

            	
              the
                Company shall authorize the voluntary or involuntary dissolution,
                liquidation or winding up of the affairs of the
                Company;

            


    

    


    then
      the
      Company shall cause to be filed at each office or agency maintained for the
      purpose of conversion of this Note, and shall cause to be mailed to the Holder
      at its last address as it shall appear upon the books of the Company, on or
      prior to the date notice to the Company's stockholders generally is given,
      a
      notice stating (x) the date on which a record is to be taken for the purpose
      of
      such dividend, distribution, redemption, rights or warrants, or if a record
      is
      not to be taken, the date as of which the holders of Common Stock of record
      to
      be entitled to such dividend, distributions, redemption, rights or warrants
      are
      to be determined or (y) the date on which such reclassification, consolidation,
      merger, sale, transfer or share exchange is expected to become effective or
      close, and the date as of which it is expected that holders of Common Stock
      of
      record shall be entitled to exchange their shares of Common Stock for
      securities, cash or other property deliverable upon such reclassification,
      consolidation, merger, sale, transfer or share exchange. 

     

    (d) Reservation
      and Issuance of Underlying Securities.
      The
      Company covenants that it will at all times reserve and keep available out
      of
      its authorized and unissued Common Stock solely for the purpose of issuance
      upon
      conversion of this Note (including repayments in stock), free from preemptive
      rights or any other actual contingent purchase rights of persons other than
      the
      holders of the Notes, not less than such number of shares of Common Stock as
      shall (subject to any additional requirements of the Company as to reservation
      of such shares set forth in the Purchase Agreement) be issuable (taking into
      account the adjustments under this Section 3 but without regard to any ownership
      limitations contained herein) upon the conversion of this Note hereunder in
      Common Stock (including conversion of Accreted Amounts or the Interim Repayment
      Amount into Common Stock). The Company covenants that all shares of Common
      Stock
      that shall be so issuable shall, upon issue, be duly authorized, validly issued,
      fully paid, nonassessable. 

     

    (e) No
      Fractions.
      Upon a
      conversion hereunder the Company shall not be required to issue stock
      certificates representing fractions of shares of Common Stock, but may if
      otherwise permitted, make a cash payment in respect of any final fraction of
      a
      share based on the closing price of a share of Common Stock at such time. If
      the
      Company elects not, or is unable, to make such a cash payment, the Holder shall
      be entitled to receive, in lieu of the final fraction of a share, one whole
      share of Common Stock.

     

    (f) Charges,
      Taxes and Expenses.
      Issuance of certificates for shares of Common Stock upon the conversion of
      this
      Note (including conversion of Accreted Amounts and the Interim Repayment Amount)
      shall be made without charge to the holder hereof for any issue or transfer
      tax
      or other incidental expense in respect of the issuance of such certificate,
      all
      of which taxes and expenses shall be paid by the Company, and such certificates
      shall be issued in the name of the Holder or in such name or names as may be
      directed by the Holder; provided,
      however,
      that in
      the event certificates for shares of Common Stock are to be issued in a name
      other than the name of the Holder, this Note when surrendered for conversion
      shall be accompanied by an assignment form; and provided further,
      that
      the Company shall not be required to pay any tax or taxes which may be payable
      in respect of any such transfer.


    
      
        
        

      

      
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    (g) Cancellation.
      After
      all of the Principal Amount (including accrued but unpaid interest and Accreted
      Amounts and default payments at any time owed on this Note) have been paid
      in
      full or converted into Common Stock, this Note shall automatically be deemed
      canceled and the Holder shall promptly surrender the Note to the Company at
      the
      Company’s principal executive offices.

     

    (h) Notices
      Procedures.
      Any and
      all notices or other communications or deliveries to be provided by the Holder
      hereunder, including, without limitation, any Conversion Notice, shall be in
      writing and delivered personally, by confirmed facsimile, or by a nationally
      recognized overnight courier service to the Company at the facsimile telephone
      number or address of the principal place of business of the Company as set
      forth
      in the Purchase Agreement. Any and all notices or other communications or
      deliveries to be provided by the Company hereunder shall be in writing and
      delivered personally, by facsimile, or by a nationally recognized overnight
      courier service addressed to the Holder at the facsimile telephone number or
      address of the Holder appearing on the books of the Company, or if no such
      facsimile telephone number or address appears, at the principal place of
      business of the Holder. Any notice or other communication or deliveries
      hereunder shall be deemed delivered (i) upon receipt, when delivered personally,
      (ii) when sent by facsimile, upon receipt if received on a Business Day prior
      to
      5:00 p.m. (Eastern Time), or on the first Business Day following such receipt
      if
      received on a Business Day after 5:00 p.m. (Eastern Time) or (iii) upon receipt,
      when deposited with a nationally recognized overnight courier
      service.

     

    (i)  Beneficial
      Ownership Limitation.
      Notwithstanding anything to the contrary contained herein, the number of shares
      of Common Stock that may be acquired by the Holder upon conversion pursuant
      to
      the terms hereof (including conversion of Accreted Amounts and the Interim
      Repayment Amount into Common Stock hereunder) shall not exceed a number that,
      when added to the total number of shares of Common Stock deemed beneficially
      owned by such Holder (other than by virtue of the ownership of securities or
      rights to acquire securities (including the Notes) that have limitations on
      the
      Holder’s right to convert, exercise or purchase similar to the limitation set
      forth herein), together with all shares of Common Stock deemed beneficially
      owned at such time (other than by virtue of the ownership of securities or
      rights to acquire securities that have limitations on the right to convert,
      exercise or purchase similar to the limitation set forth herein) by the holder’s
“affiliates” at such time (as defined in Rule 144 of the Securities Act)
      (“Aggregation
      Parties”)
      that
      would be aggregated for purposes of determining whether a group under Section
      13(d) of the Exchange Act exists, would exceed 9.9% of the total issued and
      outstanding shares of the Common Stock (the “Restricted
      Ownership Percentage”).
      Each
      holder shall have the right (x) at any time and from time to time to reduce
      its
      Restricted Ownership Percentage immediately upon notice to the Company and
      (y)
      (subject to waiver) at any time and from time to time, to increase its
      Restricted Ownership Percentage immediately in the event of the announcement
      as
      pending or planned, of a Change in Control Transaction. The Company’s obligation
      to issue shares of Common Stock which would exceed such limits referred to
      in
      this Section 3(i) shall be suspended to the extent necessary until such time,
      if
      any, as shares of Common Stock may be issued in compliance with such
      restrictions.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    


    Section
      4. Principal
      Repayments.

     

    (a) Interim
      Repayment Right.

     

    (i) Holder
      Repayment Right.
      The
      Holder shall have the right to compel the Company to repay up to its pro rata
      share of $1,000,000 in outstanding principal hereunder (based on the original
      principal amount of this Note relative to the original principal amount of
      all
      Notes issued under the Purchase Agreement), together with all Accreted Amounts
      accrued thereon through the date of payment (“Interim
      Repayment Amount”),
      on
      December 31, 2008 (“Interim
      Repayment Date”)
      either
      in cash or by automatically converting such amount into shares of Common Stock,
      or a combination thereof, at the Holder’s option.

     

    (ii) Exercise
      Procedure.
      In
      order to exercise such interim repayment right, the Holder shall deliver the
      Company a written notice electing to compel such interim repayment
      (“Repayment
      Election Notice”),
      specifying the dollar amount of the Interim Repayment Amount to be converted
      into Common Stock and the dollar amount of the Interim Repayment Amount to
      be
      repaid in cash. Such Repayment Election Notice may be delivered at any time
      prior to the Interim Repayment Date, provided that the Interim Repayment Amount
      is not required to be paid until the tenth day after such Repayment Election
      Notice is delivered if it is delivered after December 21, 2008.

     

    (iii) Payment/Conversion.
      On the
      Interim Repayment Date, (x) the Company shall pay to the Holder in cash the
      portion of the Interim Repayment Amount elected to be repaid in cash in the
      Repayment Election Notice and (y) the portion of the Interim Repayment Amount
      elected to be converted into stock in the Repayment Election Notice shall be
      automatically converted into Common Stock in accordance with the terms hereof.
      If the Holder does not receive the requisite amount of cash in connection with
      such repayment within three (3) Trading Days following the Interim Repayment
      Date, such amount shall bear interest hereunder at the Default Rate. To the
      extent the Holder elects to make any such repayment by converting all or a
      portion of the Interim Repayment Amount into shares of Common Stock pursuant
      to
      this Section 4(a), the number of such shares to be issued upon such conversion
      as of the Interim Repayment Date shall be the number determined by dividing
      (x)
      the portion of the Interim Repayment Amount to be converted into Common Stock,
      by (y) the Interim Conversion Price as of the Interim Repayment Date. Such
      shares shall be issued and delivered within three (3) Trading Days following
      the
      Interim Repayment Date and shall be duly authorized, validly issued, fully
      paid,
      non-assessable and free and clear of all encumbrances, restrictions and legends.
      Notwithstanding anything to the contrary herein, the Holder shall be prohibited
      from exercising its right to convert any portion of the Interim Repayment Amount
      into shares of Common Stock on the applicable Interim Repayment Date to the
      extent, and only to the extent, that such conversion into shares of Common
      Stock
      would result in the Holder hereof exceeding the limitations contained in Section
      3(i) above. Any conversion hereunder into shares of Common Stock pursuant to
      the
      terms hereof shall constitute and be deemed a conversion of such portion of
      the
      Principal Amount of this Note for all purposes under this Note and the other
      Agreements (except that such conversion shall be at the Interim Conversion
      Price
      and except as otherwise provided herein).

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    


    (b) Maturity
      Date.

     

    (i) Holder
      Election.
      The
      Holder may elect to have the all or part of the principal balance hereunder
      remaining outstanding on the Maturity Date, together with all Accreted Amounts
      accrued thereon through the Maturity Date (“Maturity
      Amount”),
      repaid on the Maturity Date either in cash or by automatically converting such
      amount into shares of Common Stock, or a combination thereof, at the Holder’s
      option.

     

    (ii) Exercise
      Procedure.
      Prior
      to the Maturity Date the Holder shall deliver a written notice, which may be
      by
      email (“Maturity
      Election Notice”),
      specifying the dollar amount of the Maturity Amount to be converted into Common
      Stock and the dollar amount of the Maturity Amount to be repaid in cash.


     

    (iii) Payment/Conversion.
      On the
      Maturity Date, (x) the Company shall pay to the Holder in cash the portion
      of
      the Maturity Amount elected to be repaid in cash in the Maturity Election Notice
      and (y) the portion of the Maturity Amount elected to be converted into stock
      in
      the Maturity Election Notice shall be automatically converted into Common Stock
      in accordance with the terms hereof. If the Holder does not receive the
      requisite amount of cash in connection with such repayment within three (3)
      Trading Days following the Maturity Date, such amount shall bear interest
      hereunder at the Default Rate. To the extent the Holder elects to make any
      such
      repayment by converting all or a portion of the Maturity Amount into shares
      of
      Common Stock pursuant to this Section 4(a), the number of such shares to be
      issued upon such conversion as of the Maturity Date shall be the number
      determined by dividing (x) the portion of the Maturity Amount to be converted
      into Common Stock, by (y) the Conversion Price as of the Maturity Date. Such
      shares shall be issued and delivered within three (3) Trading Days following
      the
      Maturity Date and shall be duly authorized, validly issued, fully paid,
      non-assessable and free and clear of all encumbrances, restrictions and legends.
      Notwithstanding anything to the contrary herein, the Holder shall be prohibited
      from exercising its right to convert any portion of the Maturity Amount into
      shares of Common Stock on the Maturity Date to the extent, and only to the
      extent, that such conversion into shares of Common Stock would result in the
      Holder hereof exceeding the limitations contained in Section 3(i) above. Any
      conversion hereunder into shares of Common Stock pursuant to the terms hereof
      shall constitute and be deemed a conversion of such portion of the Principal
      Amount of this Note for all purposes under this Note and the other
      Agreements.

     

    Defeasement.
      In the
      event the Mortgage is defeased as set forth in Section 7.2(c) of the Purchase
      Agreement, then the Holder may at any time and from time to time thereafter
      demand immediate repayment of all or part of the amounts (including principal
      and Accreted Amounts) then outstanding and accrued under this Note.


    


    Section
      5. Defaults
      and Remedies.

     

    (a) Events
      of Default. An
      “Event
      of Default”
      is:

     

    (i) a
      default
      in payment of the Principal Amount under any of the Notes on or after the date
      such payment is due, which default continues for five (5) Business Days after
      written notice of such non-payment has been received by the Company, or a
      default in payment of accrued but unpaid Accreted Amounts under any of the
      Notes
      on or after the date such payment is due, which default continues for fifteen
      (15) days after written notice of such non-payment has been received by the
      Company;

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    


    (ii) a
      default
      in the timely issuance of Underlying Shares upon and in accordance with terms
      hereof, which default continues for five (5) Business Days after the Company
      has
      received written notice informing the Company that it has failed to issue shares
      or deliver stock certificates within the third Trading Day following the
      Conversion Date;

     

    (iii) failure
      by the Company or the Operating Subsidiary for thirty (30) days after written
      notice has been received by the Company to comply with any material provision
      of
      any of the Notes, the Purchase Agreement, the Registration Rights Agreement,
      the
      Subsidiary Guaranty or the Mortgage or any other agreement between the Holder,
      on the one hand, and the Company and/or the Operating Subsidiary, on the other
      hand (including without limitation the failure to issue the requisite number
      of
      shares of Common Stock upon conversion hereof and the failure to redeem Notes
      upon the Holder’s request following a Change in Control Transaction pursuant to
      this Note);

     

    (iv) any
      representation, warranty or statement made or furnished by the Company or any
      of
      its subsidiaries to the Holder (or any collateral agent on behalf of the Holder)
      under the Purchase Agreement, Registration Rights Agreement, Subsidiary
      Guaranty, Mortgage or any other agreement between the Holder and the Company
      or
      any certificate of schedule required thereby, is false or misleading in any
      material respect when made;

     

    (v) the
      Subsidiary Guaranty or Mortgage ceases to be in full force and effect (including
      failure to create a valid and perfected first priority lien on and security
      interest in the Mortgaged Property (as defined in the Mortgage) at any time
      for
      any reason, or, if the Mortgage is defeased in accordance with Section 7.2(c)
      of
      the Purchase Agreement, the Escrow Funds fail to be held in accordance with
      the
      terms of such Section and the Escrow Agreement (as such terms are defined in
      such Section);

     

    (vi) any
      material adverse change in the condition, value or operation of a material
      portion of the Mortgaged Property or, if the Mortgage is defeased in accordance
      with Section 7.2(c) of the Purchase Agreement, any material adverse change
      in
      the condition or value or a material portion of the Escrow Funds;

     

    (vii) any
      acceleration prior to maturity of, any mortgage, indenture or instrument under
      which there may be issued or by which there may be secured or evidenced any
      indebtedness for money borrowed by the Company or any of its subsidiaries for
      in
      excess of $250,000 or for money borrowed the repayment of which is guaranteed
      by
      the Company or any of its subsidiaries for in excess of $250,000, whether such
      indebtedness or guarantee now exists or shall be created hereafter;

     

    (viii) the
      dissolution or termination of the Company or the Operating Subsidiary as a
      going
      concern; or

     

    (ix) if
      the
      Company is subject to any Bankruptcy Event.


    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    


    Remedies.
      If an
      Event of Default occurs and is continuing with respect to any of the Notes,
      the
      Holder may declare all of the then outstanding Principal Amount of this Note
      and
      all other Notes held by the Holder, including any default interest and Accreted
      Amounts due thereon, to be due and payable immediately, except that in the
      case
      of an Event of Default arising from events described in clauses (viii) through
      (ix) of Section 5(a), this Note shall become due and payable without further
      action or notice. In the event of such acceleration, the amount due and owing
      to
      the Holder shall be the greater of (1) 120% of the outstanding Principal Amount
      of the Notes held by the Holder (plus all accrued and unpaid default interest
      and Accreted Amounts, if any) and (2) the product of (A) the highest closing
      price for the five (5) Trading Days immediately preceding the Holder’s
      acceleration and (B) the outstanding Principal Amount divided by the lower
      of
      the Conversion Price and the Interim Conversion Price (if still in effect).
      In
      either case the Company shall pay interest on such amount in cash at the Default
      Rate to the Holder if such amount is not paid within 7 days of Holder’s request.
      The remedies under this Note shall be cumulative.

    Section
      6. 
      Security and Guaranty.
      The
      Company’s and the Operating Subsidiary’s obligations under this Note and the
      other Agreements are secured by Mortgaged Property (as defined in the Mortgage)
      pursuant to the terms of the Mortgage (or the Escrow Funds (as defined in the
      Purchase Agreement), if the Mortgage is defeased pursuant to Section 7.2(c)
      of
      the Purchase Agreement) and the obligations under this Note are guaranteed
      by
      the Operating Subsidiary pursuant to the Subsidiary Guaranty. 

     

    Section
      7.  General.

     

    (a) Payment
      of Expenses.
      The
      Company agrees to pay all reasonable charges and expenses, including attorneys'
      fees and expenses, which may be incurred by the Holder in successfully enforcing
      this Note and/or collecting any amount due under this Note. This includes,
      without limitation and subject to any limits under applicable law, Holder’s
      reasonable collection costs under Section 5(b) and Holder’s reasonable
      attorneys’ fees and legal expenses whether or not there is a lawsuit, including
      reasonable attorneys’ fees and legal expenses for bankruptcy proceedings
      (including efforts to modify or vacate any
      automatic stay or injunction), appeals and any anticipated post-judgment
      collection services. If not prohibited by applicable law, the Company also
      will
      pay any court costs, in addition to all other sums provided by law.

     

    (b) Savings
      Clause.
      In case
      any provision of this Note is held by a court of competent jurisdiction to
      be
      excessive in scope or otherwise invalid or unenforceable, such provision shall
      be adjusted rather than voided, if possible, so that it is enforceable to the
      maximum extent possible, and the validity and enforceability of the remaining
      provisions of this Note will not in any way be affected or impaired thereby.
      In
      no event shall the amount of interest paid or converted hereunder (which for
      this purpose shall include all default interest, all Accreted Amounts and all
      other consideration or charges deemed to be interest) exceed the maximum rate
      of
      interest on the unpaid principal balance hereof allowable by applicable law.
      If
      any sum is collected in excess of the applicable maximum rate, the excess
      collected shall be applied to reduce the principal debt. If the interest
      actually collected hereunder is still in excess of the applicable maximum rate,
      the interest rate shall be reduced so as not to exceed the maximum allowable
      under law.


    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    


    (c) Amendment.
      Neither
      this
      Note nor any term hereof may be amended, waived, discharged or terminated other
      than by a written instrument signed by the Company and the Holder.

     

    (d) Assignment,
      Etc.
      The
      Holder may assign or transfer this Note to any transferee only with the prior
      written consent of the Company, which may not be unreasonably withheld or
      delayed, provided that (i) the Holder may assign or transfer this Note to any
      of
      such Holder's Affiliates without the consent of the Company
      and
      (ii) upon any Event of Default, the Holder may assign or transfer this
Note
      without
      the consent of the Company, provided in each case that such Affiliate,
      transferee or assignee acknowledges in writing to the Company that the
      representations and warranties contained in Section 5 of the Purchase Agreement
      shall apply to such Affiliate, transferee or assignee. The
      Holder
      shall notify the Company of any such assignment or transfer promptly. This
      Note
      shall be binding upon the Company and its successors and shall inure to the
      benefit of the Holder and its successors and permitted assigns.

     

    (e) Waiver.

     

    (i) No
      failure on the part of the Holder to exercise, and no delay in exercising any
      right, remedy or power hereunder shall operate as a waiver thereof, nor shall
      any single or partial exercise by the Holder of any right, remedy or power
      hereunder preclude any other or future exercise of any other right, remedy
      or
      power. Each and every right, remedy or power hereby granted to the Holder or
      allowed it by law or other agreement shall be cumulative and not exclusive
      of
      any other, and may be exercised by the Holder from time to time. The release
      of
      any party liable under this Note shall not operate to release any other party
      liable under this Note.

     

    (ii) Except
      as
      otherwise provided herein, the Company and any other person who signs,
      guarantees or endorses this Note, to the extent allowed by law, hereby expressly
      waives demand and presentment for payment, notice of nonpayment, protest, notice
      of protest, notice of dishonor, notice of acceleration or intent to accelerate,
      all other notices whatsoever and bringing of suit and diligence in taking any
      action to collect amounts called for hereunder, and will be directly and
      primarily liable for the payment of all sums owing and to be owing hereunder,
      regardless of and without any notice, diligence, act or omission as or with
      respect to the collection of any amount called for hereunder.

     

    (f) Governing
      Law; Jurisdiction.

     

    (i) Governing
      Law. THIS
      NOTE
      WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
      OF
      NEW YORK WITHOUT REGARD TO ANY CONFLICTS OF LAWS PROVISIONS THEREOF THAT WOULD
      OTHERWISE REQUIRE THE APPLICATION OF THE LAW OF ANY OTHER
      JURISDICTION.

     

    (ii) Jurisdiction.
      The
      Company irrevocably submits to the exclusive jurisdiction of any State or
      Federal Court sitting in the State of New York, County of New York, over any
      suit, action, or proceeding arising out of or relating to this Note.
      The
      Company irrevocably waives, to the fullest extent permitted by law, any
      objection which it may now or hereafter have to the laying of the venue of
      any
      such suit, action, or proceeding brought in such a court and any claim that
      suit, action, or proceeding has been brought in an inconvenient
      forum.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    


    The
      Company agrees that the service of process upon it mailed by certified or
      registered mail (and service so made shall be deemed complete three days after
      the same has been posted as aforesaid) or by personal service shall be deemed
      in
      every respect effective service of process upon it in any such suit or
      proceeding. Nothing herein shall affect Holder's right to serve process in
      any
      other manner permitted by law. The Company agrees that a final non-appealable
      judgement in any such suit or proceeding shall be conclusive and may be enforced
      in other jurisdictions by suit on such judgment or in any other lawful
      manner.

     

    (iii) NO
      JURY TRIAL.
      THE
COMPANY
      HERETO
      KNOWINGLY AND VOLUNTARILY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO A TRIAL
      BY
      JURY WITH RESPECT TO ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER, OR
      IN
      CONNECTION WITH, THIS NOTE.

     

    (g) Replacement
      Notes.
      This
      Note may be exchanged by Holder at any time and from time to time for a Note
      or
      Notes with different denominations representing an equal aggregate outstanding
      Principal Amount, as reasonably requested by Holder, upon surrendering the
      same.
      No service charge will be made for such registration or exchange. In the event
      that Holder notifies the Company that this Note has been lost, stolen or
      destroyed, a replacement Note identical in all respects to the original Note
      (except for registration number and Principal Amount, if different than that
      shown on the original Note), shall be issued to the Holder, provided that the
      Holder executes and delivers to the Company an agreement reasonably satisfactory
      to the Company to indemnify the Company from any loss incurred by it in
      connection with this Note.

    


    [Signature
      Page Follows]


    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    


    IN
      WITNESS WHEREOF,
      the
      Company has caused this Note to be duly executed on the day and in the year
      first above written.

    

      
        	 	
                NEXMED,
                  INC.

              
	 	 	 
	 	 	 
	 	
                By:

              	
                /s/
                  Vivian Liu

              
	 	
                Name:

              	
                Vivian
                  Liu

              
	 	
                Title:

              	
                President
                  and CEO

              
	 	 	 
	 	 	 
	 	
                By:

              	
                /s/
                  Mark Westgate

              
	 	
                Name:

              	
                Mark
                  Westgate

              
	 	
                Title:

              	
                Chief
                  Financial Officer

              


      

    

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    


    EXHIBIT
      A

    


    FORM
      OF CONVERSION NOTICE

    


    (To
      be
      executed by the Holder

    in
      order
      to convert a Note)

    


    
      	
            	Re:	
              Note
                (this “Note”) issued by NEXMED,
                INC.
                to
                ______________________________ on or about June ___, 2008 in the
                original
                principal amount of $_____________.

            


    

    


    The
      undersigned hereby elects to convert the aggregate outstanding Principal Amount
      (as defined in the Note) indicated below of this Note into shares of Common
      Stock, $0.001 par value per share (the “Common Stock”), of NEXMED,
      INC.
      (the
“Company”) according to the conditions hereof, as of the date written below. If
      shares are to be issued in the name of a person other than undersigned, the
      undersigned will pay all transfer taxes payable with respect thereto and is
      delivering herewith such certificates and opinions as reasonably requested
      by
      the Company in accordance therewith. No fee will be charged to the holder for
      any conversion, except for such transfer taxes, if any. The undersigned
      represents as of the date hereof that, after giving effect to the conversion
      of
      this Note pursuant to this Conversion Notice, the undersigned will not exceed
      the “Restricted Ownership Percentage” contained in Section 3(i) of this
      Note.

    

      
        	
                Conversion
                  information:

              	 
	 	
                Date
                  to Effect Conversion

              
	 	 
	 	 
	 	
                Aggregate
                  Principal Amount of Note Being Converted

              
	 	 
	 	 
	 	
                Number
                  of Shares of Common Stock to be Issued

              
	 	 
	 	 
	 	
                Applicable
                  Conversion Price

              
	 	 
	 	 
	 	
                Signature
                  

              
	 	 
	 	 
	 	
                Name

              
	 	 
	 	 
	 	
                Address